Mizuho’s Shen Says China’s Monetary Policy ‘No Longer Prudent’

The People’s Bank of China said today the one-year lending
rate will fall by 31 basis points and the one-year deposit rate
will drop by 25 basis points effective tomorrow. Banks can offer
loans of as much as 30 percent less than benchmark rates, the
central bank said on its website.

“It looks like that the Chinese authorities have realized
that stabilizing growth is a challenging job now. If they do not
loosen, hard-landing is possible.”

“This is aggressive loosening -- last month the discount
was 20 percent, and now 30 percent. It also indicates interest
rate liberalization is fast. The monetary policy is no longer
prudent.”

“It’s likely that June’s data are not good. CPI may have
come down more than expected.”